Why Financial Regulators Should Study Cryptocurrencies?

With the growing interest in cryptocurrencies, many regulators turn to bashing ICOs and Blockchain in general.

However, Monetary Authority of Singapore’s (MAS) Financial Markets Strategy Department Executive Director Yao Loong Ng took a different stance and encourages regulators around the world to have the fiduciary duty to learn about initial coin offerings (ICO) and digital currencies.

Ng even highlights that the developments around ICOs and virtual currencies can serve as lessons for regulators.

In his comments during a panel discussion at the Association of Southeast Asian Nation (ASEAN) Capital Markets Conference that was held in Kuala Lumpur, Malaysia in early November 2017, Ng claimed that the “time to market” for ICOs is significantly lower as compared with initial public offerings (IPO), which could take up to nine months to prepare.

"If the process of writing a white paper for [an] ICO and subsequently listing on an exchange could take a matter of days, then clearly it is something that we can learn from."

In August, MAS issued a notice reminding investors to take precautions on the potential risks around ICOs and digital currency-related investment schemes.

Current efforts to regulate cryptocurrencies

Meanwhile, the Securities Commission Malaysia (SC) has announced that it is currently drafting relevant regulations and guidelines for functional use cases of virtual assets, including the “secondary market trading of established cryptocurrencies and digital assets.”

According to SC Chairman Tan Sri Ranjit Singh, the SC is closely cooperating with Malaysian central bank, Bank Negara Malaysia (BNM), in the development of a framework on digital currencies. He claimed that the framework is expected to be finalized in the next few months.

"Together with BNM, we will look at the area carefully and as SC is in charge of the secondary market, we would craft regulations to ensure that the trading values have the right conditions in place for market integrity and investor projection purposes."

Learn, not interfere

Munish Sharma, consultant at the Institute for Defence Studies and Analyses in New Delhi, discussed the ongoing dilemma that most regulators often struggle with the nascent technology especially in such highly regulated space:

“Widely seen as a disruption for the traditional banking and financial institutions, cryptocurrencies have gained significant traction over the last half a decade, at the same time creating a regulatory nightmare for banking regulators across the globe. Governments and their regulatory bodies have been brainstorming for measures to either regulate the growth of cryptocurrencies, as against just letting them proliferate without regulation and interference.”